People sometimes assume that because I write about options and municipal bonds, my portfolio must be complicated. It's the opposite — I've deliberately kept the structure simple enough to explain in three buckets, because complexity is where mistakes hide.
Bucket one: the core (roughly 55%)
The largest bucket is boring on purpose — broad, low-cost index funds covering the total U.S. market and a smaller international allocation. I don't trade this bucket. I don't write options against most of it. It exists to capture the market's long-run return without requiring me to be clever, which is a relief on the weeks when I don't feel clever at all.
Bucket two: income positions (roughly 30%)
This is where the individual stocks I write covered calls against live — the KO, PG, JNJ-type names discussed in my covered calls article. I treat this bucket as a part-time job: it takes ongoing attention, generates regular premium income, and carries more single-stock risk than the core bucket, which is exactly why it's capped well below it.
The core bucket lets the market do the work. This bucket is where I do mine.
Bucket three: bond tinkering (roughly 15%)
The smallest bucket, and the one I enjoy researching the most, is my municipal bond ladder — described in more detail in my municipal bonds article. It's intentionally sized to be meaningful but not decisive: even if I made a serious credit misjudgment on one issuer, the impact on my total net worth would be contained.
Why these particular percentages
These numbers aren't a formula I'd hand to someone else — they reflect my age, my income stability, and my honest appetite for hands-on research. Someone earlier in their career with a longer time horizon might reasonably run a larger core bucket and skip the bond tinkering entirely. Someone closer to retirement might flip my ratios. The structure matters more than the exact split: know what each bucket is for, and don't let one bleed into another's job.
- Core: long-term growth, minimal maintenance, no single-stock risk.
- Income: active management, options premium, concentrated but capped.
- Bonds: capital preservation, tax efficiency, and honestly, curiosity.
How I rebalance
Roughly once a year, I check whether any bucket has drifted more than five percentage points from its target — usually the income bucket, after a strong run in a covered-call stock. When that happens, I trim back toward target rather than let one bucket's good year quietly turn into next year's oversized risk.